The muni market put together back to back winning days as the MMD curve lowered yields throughout most of the scale with the long end getting most of the change. Changes ranged from 2-7 basis points lower from 2017 on out. The buyers continued to show up not only on the long end of the curve but many buyers who realized they were under invested in munis (think insurance companies -- taxable and BAB buyers in 2010) started buying out past the 10 year range very heavily. NYC Water benefited from the frothiness today selling $450mm long tax exempts and was able to LOWER yields by 3-6 bps from the original pricing. Word is buyers from all walks of life bought this loan (2040 and 2043 maturities) with zeal. Funds, cross over buyers, BAB owners of the same credit, hedge funds, insurance companies and retail snapped up this deal that would have been struggling last week to sell this many bonds on the long end!! Seismic shift in investing for sure. But as always happens in munis, this rally will probably go too far and suffer a set back that will trap the street again. It never fails. Like rookies in Vegas it's all in or nothing. Maybe not tomorrow or next week but it is coming. At some point supply will feel like ice water and wake up the party goers. But we will take it for now.
Ratios are still very favorable for munis vs. treasuries (see 1/17post) : 5yr MMD 97.5% of treasuries, 10 yr 102.4% and 30 yr 110% and higher rates to boot!! Not bad work if you can get it. Although these ratios are not too different than they were in other points in time during 2010, rates are definitely higher now .. more so on the longer end. Therein lies the reason for the rush to buy. Last year many buyers held their noses when they purchased bonds due to the low rates they purchased. The move to higher rates have moved buyers from the sidelines to the actual playing field. Hooray for that.
Rumor has it The Donald bought NYC Waters...... imagine that from beds to bonds.....
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